Economics

Kidney diseases have become a crippling phenomenon in todays society. As the many individuals suffering from kidney diseases search for the ultimate solution to their problem they encounter a vast range of obstacles. It is in this view that Postrel (2009) seeks to enlighten the public on the increasing numbers of kidney patients and the insufficient numbers of willing donors. In this endeavor, the author aims at providing an amicable solution for the kidney donor shortage through donor compensation programs and the use of financial incentives. Indeed, the alternative for kidney patients who are awaiting donations has been the use of consistent dialysis which even though prolongs patients lives does not offer them quality life. Furthermore, there are crippling statistics which showcase the extensive costs incurred by dialysis patients.

Postrel (2009) presents strategies being used by organizations in trying to shorten the donor waiting lists. Both paired exchanges and donor chains are used to increase the number of donors available to kidney transplants potential recipients. Paired exchanges allow incompatible donors to find compatible recipients through a pair of donors and recipients who will both benefit the kidney recipients. However, this strategy can only reduce the waiting list so far plus its economic limitations bar its effectiveness. Although donor chains provide better chances for waiting recipients to receive compatible donors, it still has no capacity to elevate the increasing waiting list. As such Postrel (2009) proposes the need for compensation and financial incentives for donors in order to increase the number of kidney donors. In addition to this, these factors would reduce the financial expenses incurred by long dialysis patients. This paper seeks to present an economic argument in favor of Postrels argument. Among the aspects to be discussed include the justification for compensations using the demand and supply analysis, using the concept that compensation and financial incentives can reduce expenditures and increase overall economic benefits. Furthermore, this strategy would work towards crippling transplant tourism which is costing the nation hefty millions of dollars. It is also important to acknowledge that such a system will only function advantageously if it is well regulated. With such a system in place its accrued advantages will definitely overshadow any arguments against them.

Postrel (2009) has clearly highlighted the existence of a gap between the demand for kidneys and their supplies. This disparity between demand and supply has resulted to various unsatisfactory implications. In essence, there seems to be long waiting lists for recipients which exceed the various donor registries capacities to supply. Also, when patients finally reach the top of the list they are often older and sicker which limits successful kidney transplantations. As an economist, this observation leads to the development of ideas meant to equilibrate this gap and at the same time evaluating the factors causing this discrepancy. Following this mindset, it is obvious that current efforts supporting the increment of kidney donors are being encumbered by various obstacles. Even though, altruistic donors have contributed to most of the live donations over the years practitioners need to create room for more altruism. This can be done by the use of incentives or compensations for live donors.

Allowing the use of these incentives could drastically increase the supply of kidneys and therefore eliminate the long waiting recipient lists. Using financial incentives live donors would be amiable to taking the risk of parting with their kidneys for an attractive price. Indeed, the current altruism based strategy offers compensation to donors in non-monetary values but in the form of satisfaction for saving another life. Regardless of how priceless this may be the ultimate question remains as whether there is a defined price by which the society is willing to tolerate as kidney patients die waiting for donations. Individuals and organizations opposing the use of financial incentives need to rethink their stands and try to imagine their reactions when there is an increase in the number of kidney patients dying on a daily basis.

Another factor which clearly fosters the use of compensation and incentives is the expected benefit of reducing expenditures and in turn leading to economic growth. Kidney patients not only carry the burden of their malfunctioned organs but also a great financial burden. For those who have been on waiting lists for long, they end up incurring so many expenses both in dialysis and their up keep. These individuals live on specialized diets and may have to part with more finances when purchasing foods.

Furthermore, their trips to and from the hospitals also incur large costs. In addition, there are the psychological strains which affect both the waiting recipients and their families. Having to deal with stress related illnesses and other psychological ailments also costs them heavily. Evidently, the long waiting lists are in no way contributing to the positive growth of the countrys revenues. Furthermore, patients suffering from kidney diseases more often than not have to terminate their employment and stay home. In doing so, they reduce the amounts of collected revenues. Also, they become reliant on the government for their upkeep through disability payments. Eventually, kidney illnesses are observed to go against sound financial management views which advocate for spending less and saving more.

Allowing the use of incentives is not only bound to decrease the numbers of patients in waiting lists but it will also cut down on overall expenditure. In comparison with long time dialysis, kidney transplants are relatively less costly. Postrel (2009, p.7) emphasizes that kidney transplants are estimated to save to almost 100,000 worth of medical costs. Definitely with an increment of these transplants using an incentive system would lead to the saving of more costs. Apart from decreasing these costs, more kidney transplants would lead to an increase in revenue as former patients would resume to work and contribute to the countrys income tax revenues. Kidney transplants offer patients a new lease of life and almost all patients can resume to their normal active lives. Other tangible benefits are also seen in the lives of family members of patients as they are free to resume to their lifestyles which may have been impeded by having to support a kidney patient. Furthermore, medical practitioners stand to gain financial benefits from kidney transplants. Doctors, administrators and staff members whose work depends on the number of transplants will receive payments for each transplant and also get to validate their effectiveness in their professions. Most donor registries which are run by institutions may gain credible reputation with the increment of live donations and subsequent transplants.

Graham and Livingston (2009, p.350) assert that international organ trafficking is largely fuelled by the presence of ample available organs in the US. Organ trafficking and tourism transplants are consequences of a restrictive all altruism based kidney donation system. As such people desperate to have back their lives or save their loved ones will go to great extremes of ensuring that they have acquired a compatible donor. Organ trafficking involves illegal cartels which foster the traveling of individuals to purchase kidneys from. Not only do they incur numerous expenses on these trips but they also charge the recipients hefty fees for the kidneys. This form of exploitation is bound to accelerate if no alternative measures are put in place to accommodate the shortcomings of the altruism based system. Furthermore, those who undertake tourism transplants have to use similarly numerous expenses which may deplete their financial resources. Instead of encouraging transplant tourism, the use of a regularized financial incentives system may offer such patients the benefits of acquiring a kidney for a reasonable amount of money.

In reality, there is an illegal black market for kidneys which is wrought by numerous malpractices which cost the health system dearly. Arguably there are already individuals willing to pay for a kidney and will not hesitate in doing so if presented the opportunity. However, in the black market they are exposed to many hazards which may be well avoided if they had legal means of acquiring kidneys. Further, elimination of the black market by such a system may result to health benefits for the donor and the entire society. In the current black market, organ trafficking is likely to be designed in such a way that there is intentional use of vendors whose health is inclined to deteriorate. In addition, their economic values may also decline. This is facilitated because most vendors from lower societal class levels are predisposed to poverty and are likely to make uninformed decisions. These characteristics further heighten their risks and are therefore liable to benefit from a regulated vendor compensated system.

Following these arguments in favor of a regulated compensated donor system it is paramount to note that such a system can only accrue the highlighted economic benefits if it is appropriately modeled. This means that there should be governing principles which out rightly distinguishes it from organ trafficking. Such a system first of all requires price regulations for kidney fees so as to cater for both the rich and the poor. More often than not arguments against compensations for kidney donors debate that such a system would discriminate the poor or exploit them. However, with a price regulation system there is a likelihood of preventing such incidences. Furthermore this counter argument may not hold as with highly developed countries there is an eminent recognition for personal sacrifices which is also available for the poor. Other factors to be considered include the priority for safety especially for the vendor and recipient. This consideration eliminates the possibilities of incurring further expenses due to aborted transplants. In addition, donors and recipients need to be made aware of the potential risks and outcomes of their actions. In line with this should be an establish rule of law which safeguards interests of both donors and recipients should there be cause to seek redress.

Postrel (2009) has waved an intricate article which not only enlightens the public on the nature of kidney donations but which also creates urgency for a better kidney donor system. A regulated compensation system as proposed by Postrel (2009) will as above discussed accrue economic benefits for the country, sever the gap between demand for kidney donors and supply and at the same time eliminate organ trafficking and transplant tourism. A compensation system will in overall offer more benefits for Americans than the altruism based system.

Walt Disney Company is a leading media and entertainment conglomerate which earns a 36.1 billion in revenue in 2009. It is segmented into Media Networks, Parks and Resorts, Studio Entertainment, Consumer products and Interactive Media. The company was founded in 1923 as a movie studio, and its iconic Mickey Mouse character helped it gain popularity and develop such that in 1957 it went public, having opened Disneyland Resort in California. The company is driven by its objective of being one of the worlds leading producers and providers of entertainment and information, using its portfolio of brands to differentiate its content, services and consumer products. Its primary financial goals are to maximize earnings and cash flow, and to allocate capital profitability towards growth initiatives that will drive long-term shareholder value (The Walt Disney Studio, para 2).

Products
Creations such as Mickey Mouse, Donald Duck, Saludos Amigos, Fun and Fancy Tree, Sleeping Beauty, are famous products for Walt Disney Productions reincorporated in 1929. It has also diversified into live-action film production, television, travel, theatre, radio, publishing and online media. The company is well known for products of its film studio and operation of ABC broadcast television networks such as Disney Channel, ESPN and ABC Family. It also owns and licenses theme parks around the world. These products can generally be segmented as, media networks, parks and resorts, studio entertainment, consumer products, Disney online (Polsson, para 4).

Competitors
Disney faces quite a number of competitors since it has a wide scope of operations. The major competitors are the other large media conglomerates, such as News Corporation (NWS) and Time Warner (TWX), Viacom and CBS. Disney has been able to take a considerable share of the market due to its strategic positioning. In the Box Office Market share, Disney has been able to take thirteen per cent of the total market, just nine per cent below this market leader, Time-Warner. In other markets, it has also been able to command a substantial market share. It has quite significantly thrived in the market. It has a strategy of merging and acquiring competing companies, such as Capitol cities ABC Inc. Thereby reducing the level of competition and at the same time acquiring new tactics and strategies to thrive in the market (The Walt Disney Studio, para 6).

Financial Status
Disney reported a net income of 844 million for the first quarter of this financial year (2010). This is slightly lower than last years first fiscal quarter of 845 million. This was however above the average analysts expectations, as earnings per share were expected to be 38 cents per share but which amounted to 44 cents per share. This was due to an outstanding performance from the companys TV networks. According to The Walt Disney Company (para, 11) on January 13, 2010, the closing price of its common stock traded on the New York Stock exchange was 31.29 per share this stock has shown an upward trend.

The acquisition of Marvel Entertainment Inc. has helped the company in this time when the economy is facing a recession, which has provided an opportunity for long term growth and value creation. It seems to be a strategy that Disney has adopted to cope with recessionary periods, since in 1996, it acquired Capitol CitiesABC Inc. which created the worlds largest entertainment Company. This is a strategy that has helped Walt Disney Company to grow over the years. It has also been in partnership with major companies in movie productions and in television networks. The company formed Disney Television Network in partnership with Coca Cola Company (The Walt Disney Company, para 72).

Conclusion
Walt Disney Company is a company that has shown tremendous improvements from a simple movie studio to a world leading media and entertainment conglomerate. In my view, the company offers competitive products which are based on its strategy of delivering quality branded content to people around the world. It works towards making products which will satisfy both the parents and the children.

Disney however, requires being more innovative and using technology extensively, in order to come up with products that cater for the consumers changing and evolving needs. It will not be easy for it to dominate the market as competitors are up to the task of dominating the market. It will need to differentiate its products so as to enjoy customers loyalty.

Introduction
If we analyze the recent history of trade and relationships between economies and countries there would be a realization that as economies moved towards the 2nd millennium and beyond we saw greater integration of businesses, industries and policies. During this same time frame there was also a shift from the initial buzz of globalization to the importance of regionalization. Although the recent economic downturn and financial meltdown might have put strains on trading relations between economies and within regions as countries tried to keep a check on their national unemployment rates, by protecting industries temporarily to safeguard domestic production, however on an overall level this decline in trade liberalization would be considered as a short-run phenomenon.

What can be deduced here is that world trade will continue to grow as economies come out of this economic recession and the importance of regional trade and bodies would enhance as well. More specifically speaking, regional ties through unions have grown stronger over the years. The prime example is that of the European Union the Euro zone is like a country in itself when it comes to currency, certain aspects of foreign policy, monetary policy and other mutual issues such as national security.

The main goal of this report is to investigate the costs and benefits to countries that have joined the Southern African Development Community (SADC) while using Namibia as a prime example of whether the benefits outweigh the costs or vice-versa. The SADC is like a free trade zone and member states share a special relationship that allows them to trade among themselves more freely.
The following table explains the membership structure of the SADC from its beginnings in the year 1992

Member StatesYear JoinedWithdrawing CountriesAngola1992Botswana1992Congo1997Lesotho1992Malawi1992Mauritius1995Mozambique1992Namibia1992Swaziland1992Tanzania1992Zambia1992Zimbabwe1992South Africa1994Seychelles1997 2008Seychelles (2004)

SADC was formed in 1992 by 9 frontline southern African states with an aim to curtail the power of South Africa. Initially the goal was to become self-dependent and develop member states in terms of trade, development and infrastructure. Most of the member states, in fact 11 states within the SADC, signed the FTA (Free Trade Agreement) in 2000. (Khandelwal, 2004)

Similar kind of bodies have formed elsewhere in the world as well for example the NAFTA in the Northern American Region and OECD and many other organizations formed for either trade purposes or other economic goals. We see such bodies and regional organizations as successful and beneficial to member countries though in certain cases we do see a number of challenges arising for example political tensions within NAFTA and India-Pakistan issues hampering the progress of the SARC organization.

We know that the evolution of the European Union has come out as an impressive story of regional cooperation and it is a powerhouse in favor of such trade blocs though we must investigate the challenges that face the SADC. Specifically, after the withdrawal of Seychelles and other questions raised by experts our purpose in this report would be to evaluate the challenges that SADC faces this evaluation will use Namibia as an example and look at some specific and certain issues and once precise issues are identified a much larger scale study and research would be needed to get to the crux of the problems and challenges that are faced by the SADC.

Literature Review
Background
The idea of reviewing the documents, books and scholarly papers as part of the report was to allow the reader to have understanding of how the report is prepared and what is the flow of data in the report.

Literature
During the writing process a number of sources were consulted and used in the whole paper preparation process. Working papers from IMF were read and an understanding was developed on customs union by consulting the economic theory by John Sloman other popular customs union concepts were considered and researched from Lipsey and Chrystal (2007) the other sources of information came from the SADC portal and working papers and publications from the SADC website. These documents provided the author of the report with in-depth analysis and data on the economy of Namibia and its trade figures with major partners.

Findings
The report has concluded that for the economy of Namibia it is suitable to stay with the SADC and concentrate on developing value-added sector and train and educate a class of potential skilled workers and knowledge workers who could understand the economy of Namibia and strengthen future prospects of development. Overall we see that countries that join SADC are in a beneficial position compared to those countries that have either left SADC or never joined a similar bloc.

Conclusion
The author strongly suggests that Namibia has to have a solid purpose of development based existence within the SADC it is also relevant for all similar developing countries to join integrated economies and benefit their own people in the short-run and come away with a long-term strategic advantage by planning the direction of earned resources in the development of either extensive infrastructure or human capital (preferable) for future growth and development.

Further Research
There is potential and need to research and validate the long-term advantages of customs union this is because the author agrees that in the short-run economies can benefit from integrated economic blocs but once the advantages are complete than there is a risk of smaller economies becoming raw material providers to larger economies. 
   
Methodology
The main method of research throughout this report is based on secondary data on SADC, Namibian economy and economic concepts from books and scholarly reports. The idea was to collect a 10 year data range on Namibian economy from 1999-2009 and see whether the advantages or disadvantages of customs union can be substantiated by factual data. Secondly books and research papers were used to discuss and explain the concepts on customs union and its pros and cons.

Quantitative as well as qualitative data was used to analyze and explain the data that could substantiate the Namibian economys role in the SADC and whether it will be beneficial for the Namibian economy to be a part of the SADC. 

Pretext for Using Namibia as a Case Study
Namibia offers the unique and hopeful face of Africa the country has certain strong macro-economic indicators whereas it faces challenges of a reasonably non-diversified economy and a growing need for higher foreign investments to spur growth. Another importance facet of the Namibian economy is that in its 2030 vision the government has decided to liberalize trade in a bid to encourage economic growth through liberalized trade policies. This is another reason why Namibia is a case example in the analysis of SADCs impact on member economies since the organization largely is a trade promoting body.
Namibias economy is also based mainly on the primary sector one of the major contributors to the GDP (Gross Domestic Product) is the mining sector. This also implies that Namibia must either develop domestic industries in the secondary sector or export these raw materials to other countries to earn foreign revenues and support imports. This again brings us to the point that Namibia is a trade dependent economy in the absence of a strong secondary sector.

Finally we must understand that the Namibian economy employs most of its workforce in the primary sector therefore for its around 2 million population trade is a major source of revenues this analysis would henceforth make much more sense if it is conducted from the perspective of a country that has a lot on stake when it comes to the SADC.

Explanation of Customs Unions
A typical customs union is like a free trade area however members must follow similar or exact external tariffs or quotas on countries which fall outside the customs union. (Sloman, 2003) This seems to be a rigid definition of a customs union though many regional organizations are similar but with slightly different external tariff regimes. In comparison to this definition the SADC is much more than a customs union if we go through the objectives of the SADC we find that the organization not only looks to expand trade between the member states but also further economic growth and prosperity, become more self-reliant and efficient in mobilizing domestic resources, use the cultural affinity to resolve social and other issues that have plagued Southern Africa and amongst many other things promote peace and improve security of the people of Southern Africa.

The list of these objectives explains that SADC is more than just a customs union and its goal is greater than just providing trading support to partners and members.

Impact of a Customs Union Trade Diversification and Creation
Trade creation this occurs when once a country enters a customs union we see that production of goodsservices shifts from the high-cost producer to a country that can produce the same productservice at a low-cost level. So if we use the theory of comparative advantage that states countries specialize in the production of goods and service in which they hold a competitive advantage compared to a different productservice over another country even if the other country has absolute advantage in the production of both the goods. In simpler terms countries would start to specialize under free trade arrangements and people will have to pay less for goods that were previously being produced by high-cost manufacturers.

The way trade is created here is that if for example a country, before entering a customs union, had to pay a tariff to import certain goods from a country now the exporting country in this case had to forgo some demands because of higher prices (tariff rates) though if both the countries join a customs union than the exporting country can export more of that good and the importing countrys consumers have to pay much less to buy the same quantity of the goods. (The assumption here is that the exporting country holds a comparative advantage in the production of the good) So we see the case of trade creation as a result of increased consumption of the good after the removal of tariff.

Trade diversion This occurs when the production of goods and services shifts from low-cost producers to high cost producers for example if France was importing a particular good from New Zealand (assumption New Zealand is the most efficient producer of this good in this world) before entering the European Union and France was also paying a duty on this good which made it expensive artificially. After joining the EU France starting importing the good from UK at a cheaper overall price than New Zealand because of the absence of the duty though New Zealand still is the most efficient producer of the good.

So once countries enter customs union they must import also from the member state no matter whether the member state has a comparative advantage in the production of that good or not. If we further expand our analysis we will see that customs unions will face greater trade diversion than trade creation if they were to have high tariffs imposed on goods produced outside the customs unions. Secondly if the cost difference between the production of goods in countries within the union and outside the union is not much than again we will see trade diversion.

Long-Term Economic Advantages of Customs Union
For small countries like Namibia customs union present a great opportunity to exploit the internal economies of scale this is because the market size for products and services would increase given that no or few tariffs exist between member states. The increased market share or total number of potential customers gives the chance for businesses in different states to increase sales revenues by selling more volume and reduce unit fixed costs.

Businesses will also benefit from external economies of scale because as trade and business increases across the region rail, road and communication infrastructure will grow and improve allowing even bigger scale economies in the long-run as handling and transportation processes will become more efficient and cost effective.

Another longer term advantage could stem from a push by member states to look for better terms of trade. Drawing a parallel between a single laborer and a whole union we see that the union has the greater negotiation power similarly if member states join together and use political clout to get better terms of trade than we can see better economic returns for the member states.

We also expect that as competition breeds and increases among member states there would be an overall improvement in the efficiency of production, encouragement to investment between members and reduction in monopoly or oligopoly power. Competition among businesses will also ensure higher standing of living and better quality products. Another aspect to the integration of regional economies is that there can be an effective and quick spread of technology and platforms that can be replicated.

Long-Term Economic Disadvantages of Customs Union
A country might be sidelined in accustoms union if it has inefficient producers or infrastructural issues what will happen is that resources will start to flow out of this country to other regional hubs or geographically central states within the customs union. This is one of the major negative points of singular markets that have free movement of goods and labor. The country that becomes isolated might suffer from adverse regional multipliers effects as it will fail to attract investments from foreign and regional countries.

We already have discussed the advantages of integration but what we also need to consider is that businesses in member countries might also collaborate and we might see increased oligopolistic behavior and thus higher prices in the region. Relaxation of mergers and takeover laws will also increase the possibility of more monopolies being formed and mergers taking place that would ultimately impact competition and productivity in a negative way within the union.

Another disadvantage of customs union is that if large businesses combine successfully than a very large company within the union will become bureaucratic and inefficient hence causing higher prices and below average products for customers such large companies are also likely to face other kinds of diseconomies of scale as well. For instance red tape will cause management diseconomies of scale.
High costs could also be in shape of administering the customs union in cases where there is greater intervention in the affairs and policy making of individual members the costs of administering the union would be proportionately higher. This will again bring in inefficiencies in the customs union and its workings.

It is extremely difficult to gauge the benefits and costs to a country of entering a customs union because firstly all the countries are unique in some way or the other countries have differing landscape, resources, infrastructure, culture, political systems and other areas therefore it becomes very difficult to decide which economies will benefit from entering and which will not.

Another issue is that most of these advantages and costs are long-term therefore unless a country joins a union it can not decide with complete certainty whether the benefits will outweigh costs. Moreover certain advantages or disadvantages are politically driven in that case it becomes difficult for economists to decide the overall result of the union for a particular state.

Challenges Faced by SADC Regarding Tariff Regime
A major issue that has been highlighted by researchers from IMF (International Monetary Fund) is that there is a lack of political will from some member states of SADC when it comes to tariffs and trade liberalization experts say that it has taken a long time for countries to come closer to actual free trade in almost all sectors. 

In a typical customs union we see that certain states become dependent on trade taxes the case of SADC is no different, for the year 2000 the tax data shows that apart from South Africa the rest of the nations in SADC had 10 percent or more share of trade related taxes in fiscal revenues. This shows that the countries that are a part of the SADC are dependent on tariffs for public revenues to meet public expenditure now these trade tariffs act as barriers to market forces and cause productive and allocative inefficiencies. The dependence on trade tariffs of countries for fiscal revenues is a disadvantage of a customs union because even if trade is free of taxes within the union though by definition the union countries would have to adapt similar tax regimes against non-union countries. This would also mean that governments of states that are part of the union will become inefficient with the raising of public funds as they have an easy source of funds in the shape of trade taxes. Namibias trade tax to total revenue percentage was 38 in 2000. This shows that the dependence of countries within the SADC was too much on trade taxes. 

The Level of Trade Restrictiveness as a Measure of International Trade within Customs Unions
There are certain countries in the southern region of Africa that are open in trading practices while there are other which are not so open when it comes to trade and imports and exports. For example countries like Seychelles, Burundi, and Comoros are some of the most closed economies in the world in terms of trade whereas countries like Djibouti, Uganda, Malawai are some of the most open economies in the world. The core issue faced by the economies is that because of such vast differences in the tariff structures of countries coming to a common external tariff structure has become difficult. Moreover the more developed economies such as Kenya, South Africa have failed to take the lead role in harmonizing the policies of the region causing welfare and economic losses to the region.

Challenge of Keeping External Tariffs Low in the Region
In a region where economies are so diverse and their structure have such wide differences we see that keeping external tariffs low and uniform is a challenge and a difficult thing to achieve. Firstly it is important to have a common and low external tariff plan because that will increase trade diversion not within the region but across the globe. Secondly by decreasing external tariffs the customs union countries can promote their export sectors which in turn can bring in greater foreign exchange.
One way of achieving the tax regime is by starting of by putting lower tariffs on raw materials or semi-processed and goods and increasing tariffs on finished products though eventually the idea must be to reduce the common external tariffs to a minimal regime in the long-run. This will not only benefit societies across the globe but it will also create export related jobs across the southern African region. One of the major preconditions for such a move is to have political will since slashing duties will reduce government revenues and therefore government would have to generate tax revenues from other sources.

Namibias Trade and Integration Outlook
For the period 2000-2007, the Namibian economy saw an average of 45 of exports as GDP and 60 of GDP as imports. This means that trade is an integral part of the Namibian economy and it makes absolute sense to analyze Namibia within the context of SADC and look at what are the benefits and costs of a customs union to a country like Namibia. The African Development Bank expects Namibia to play a critical role in the SADC and continue to be a strong partner in the customs union. According to statistics, 51 of Namibias all exports come under the duty free head and another exciting fact is that 82.7 of exports from Namibia fall under either a free trade agreement (FTA) or customs union partner. (African Development Bank, 2009)

The real growth in trade of goods and services has been growing at a strong rate of 5.7 during 2005-06 from 4.2 in the early 2000s. All of these facts are discussed to emphasize the importance of trade and regional integration to the Namibian economy because Namibia is a small country in terms of population and one of the biggest advantages to the country of a regional customs union is that it has access to such a large market in terms of population the SADC provides a potential market of 350 million consumers. This is a huge market for a country like Namibia which is looking to strengthen its fundamentals and gain sustainable economic growth. (African Development Bank, 2009)

Under the SADC guidelines as of 2008 Namibia had successfully accomplished all of the targets but one which requires member states to have single digit inflation. This again shows that being part of a regional economic body helps countries maintain certain macro-economic indicators such as public debt to GDP, foreign reserves and so on. What this leads to is sustainable economic growth with the right kind of macroeconomic indicators.

Benefits to Namibia of Being a Member of a Customs Union such as SADC
One of the major benefits that Namibia has by being part of a larger customs union is that the country earns significant tax revenues through common external tariff programs. What this means is that when member states trade among themselves they put up a similar tariff regime for non-member states therefore they form a huge market potential for non-member states and earn significant tax revenues to further the cause of infrastructure and other development work within the member state countries.
The second critical advantage that we already have touched upon is based on the demand-side base for Namibia. To overcome the limited market size being part of a larger customs union helps Namibia market its product to a large customer base hence it overcomes the issues of a limited consumer market.

If we analyze import and export data of Namibia and its trading partners we see that during the late 90s and early 2000s Namibias exports to SADC countries rose quite significantly compared to imports from the SADC countries. The increase in exports to SADC countries was averaged at 61 during the time period (1999-2003). On the other hand during the same time frame we saw that the increase in imports from SADC countries grew only by about 19.6. Although in absolute terms imports from the SADC countries were far greater than the exports to SADC countries yet we saw that the growth in exports was far greater than the growth in imports which shows signs of favorable trade patterns for Namibia in the years ahead. (SADC Trade, Trade Database)

We also must understand another important aspect of the Namibian economy like most growing developing world economies Namibia needs to diversify its economy and strengthen its export related industries and its manufacturing base. This is evident from the fact that Namibia is a primary goods exporter in the region with mining (diamond) as one of its major exporting product not only to the SADC countries but also to the European Union and other parts of the world. Secondly the economy is heavily dependent on the South African economy and exports a major chunk of its goods and services to the South African market.

Here again by increasing the integration of the markets through the SADC, Namibia has an opportunity to redress the balance and develop its manufacturing sector so that it can compete with economies such as the South African economy. This would be an important step since the value-added sector has the greatest potential to fetch the highest amount of value and revenues as compared to raw materials.
What is important here to note is that diversification of not only sector and products is needed but in the long-run markets should also be diversified so that sustainable economic growth rate is experienced. The present strategy is to follow an export-led growth strategy that can then be translated into a trickle down effect for the poor quarters of the economy. In my opinion having higher imports and lower exports in absolute terms is not a bad thing for an economy like Namibia which is looking to strengthen its manufacturing base. This is because generally imports are higher because equipment, machinery and other capital goods are imported to strengthen the manufacturing sector. This scenario will only be sustainable if Namibia is able to reverse this scenario by firstly strengthening the manufacturing sector and secondly by ensuring that technology and skill is transferred into the economy from regional players so that in the medium to long-term Namibia is able to fulfill its own capital products need and look to export value added products in the long-term.

So from a regional integration perspective it is an ideal scenario for Namibia to import value added technology and capital intensive equipment from South Africa and other developed economies of the region and strengthen its manufacturing base. This represents a huge benefit to the economy of Namibia.

Another advantage from Namibias point of view is that because of regional integration Namibia is protected against competition from other manufacturers and cheaper exporters such as India and China therefore the Namibian economy has a breathing space before it is ready to face cheaper manufacturers of similar products that Namibia trades in with its partners. This is a short-term benefit and Namibia should look to understand that it is imperative to develop competitive advantages in key industries because as we move forward economic integration would increase elsewhere in the world as well and then efficient production and low costs would be an important requirement of successful export oriented countries.

Finally in my opinion the challenge for Namibia is to expand its horizons and look beyond traditional markets such as South Africa and Angola and other European countries this is because through diversification of markets not only Namibia will strengthen its GDP growth but the economy will also ensure sustainable growth. Secondly it is of utmost importance for countries like Namibia to shift to knowledge based exports because primary goods and commodities will either run out or will always fail to provide competitive margins because not much value addition is done in these sectors. It should also be realized that smaller trading partners within the SADC represent crucial long-term partnerships and they should form the back-bone of all trade from Namibia because ultimately that is where the Namibian economy will have the highest benefit.

Potential Disadvantages or Threats of Customs Union to Namibian Economy
There are potential disadvantages or threats that the Namibian economy or any other similar economy would face being a part of a customs union. The tax revenues although will provide funds for development and infrastructure build up but the problem with tariff revenues is that they inherently create misallocation of economic resources and the quality of these revenues for the government is poor because they are not sustainable in the long-run therefore rather than looking for alternative and more sustainable sources of funds governments in developing African countries look to earn major revenues from tariffs. The other disadvantage is that no foreign country or regions businesses would continue paying undue taxes or tariffs just because its manufacturers are not part of the importing countrys customs union. Such businesses would look for less expensive and competitive markets and as soon as they find them they will switch and tax revenues would be lost subsequently.

Another disadvantage from a growing economy is that if a particular sector of the economy requires to trade with a particular set of companies in a country that is not part of the union than considerable hurdles will be faced to form some kind of favorable trading arrangement between the two countries. For example for Namibia if a particular country like India has better diamond manufacturing technology to offer than being stuck in the SADC might not be such a great thing for Namibia.

From the perspective of a developing economy it is critical to have diversified markets and diversified business to sell to these various buyers and market by staying in integrated economic area, countries like Namibia can put them at a difficult position of not being able to expand into non-traditional markets. For example Namibias greatest trade partner is still South Africa and it will continue to be so unless the country can form favorable trade treaties with other countries and regions.

In recent years as we have already discussed Namibia still largely sells primary commodities and raw materials to its trading partners this also poses a danger to Namibia as it might be singled out as a raw material providing country to other regional players who benefit by producing value added products at a lower cost and than selling them to non-member states at high margins. The danger here is that of being singled out as a raw material provider and part of a chain that does not shift to other or similar businesses that the bigger trading partners within the bloc are already exporting to the other regions.

As the Namibian economy is a producer of raw material and commodities it must look to trade with partners that are willing to trade machinery and technology in exchange of primary resources because that is the only way for Namibia to redress the balance and plan prosperity for future generations when value-added products are produced within Namibia.

Another potential disadvantage of being part of a customs union is that risks are shared and contagions can exist in the financial markets of the integrated region or economic bloc. From our recent experience of the Euro meltdown we see that economic unionscustoms unions face the risk of being engulfed by a spiraling financial crisis which might have roots in one country but because of the integration of the markets it might impact all countries by some varying degree. This is a particularly new phenomenon though in an increasingly integrated financial environment markets in different countries within the region are expected to react to financial difficulties in another part of the region.

There is also considerable discussion on the political front of an economic integration political tensions or varying mindsets of governments can hurt prospects of comparatively smaller players in the region. For example the recent victory of the conservative party in UK shows that if an anti-economic integration government comes to power in an important regional player than policies could be distorted and the spirit to really benefit each other and create win-win scenarios for all partners might take a back seat. This also has the potential of practically having negative impacts on smaller players and countries like Namibia.

In a region like Southern Africa where labor laws and other business laws are rarely put in practice we see that if companies and large businesses come together in the SADC than they might form monopolies or large companies that set prices and charge premium and higher prices from customers. This can adversely impact the competition practices within the region and hurt the chances of free market practices to take root and strengthen economies in the region.

Finally another disadvantage that we see is that dependence of smaller players within the region on stable and bigger economies can overshadow the progress of smaller markets and economies like Namibia this is because they will act like raw material providers and primary commodities providing countries will only have a trickle down effect of the economic prosperity. Benefits to the region in terms of higher trade would not be equitable and probably not in favor of smaller economies if they do not diversify quickly and establish value-added industries.

 Discussion Point on Benefits versus Costs of Customs Union
What we can deduce from the discussion on the benefit and costs of customs union is that in the particular case of Namibia it is vital to have a large market so that its businesses can grow and achieve economies of scale so that investments could be made in technology and research of new products and services. Secondly in light of the performance of the Namibian economy in recent years it is evident that staying in an economic region is beneficial for Namibia and such developing countries because they must fulfill the core objectives of the government of providing employment opportunities and fulfilling basic food and fuel needs.

It is crucial to note that countries and economies that have sustainable and long-term trade partners ultimately benefit from their existence because economies run in cycles and during a recession or difficult economic time period it is important to have a strong trading ally because that country would be able to understand the absolute necessities of the exporting or smaller trade partner and subsequently will look to ensure that mutual benefit is guaranteed.

 Contested Viewpoints on the Benefits and Threats of Customs Union
From the economic viewpoint we see a huge debate on the free trade between world countries and the WTO forum. The free market economists or those who believe markets know best maintain that ultimately countries and societies will benefit from free trade because if a particular region is able to produce goods at a cheaper rate than the benefits should be available to all possible because that is the ultimate goal of markets to provide maximum benefit to its customers. (Lipsey, R  Chrystal, K, 2007)

On the other side of the fence, conservative or protectionists believe that economies must have the right to protect their industries and strategic resources to not only safe guard national interests but also look after the interests of the economys people and their economic interests as well. For example the Europeans protect their farmers from Indian and Chinese exporters because the Europeans think the jobs and incomes of their farmers are vital for societal balance.

These varying arguments result in the discussions and debates at forums and across parliaments and what we can conclude from such discussions is that no particular state is permanent and countries and economies must look to fulfill their objectives with a plan. This might not be as simple as it sounds but that has to be the crux of all governments mindset since they have elected on a particular mandate and it is their duty to fulfill it.

Conclusion
It is vital to understand that economic progress depends on the competitive advantage and the skill set that the people of a particular economy possess and develop over a period of time. Economic managers must understand that as economies grow and develop they have various options and opportunities and it is their job to undertake extensive cost and benefit analysis to see whether a particular option is worth trying or not.

Secondly it is critical to note that cultural and social factors play a major role in the development of long-term economic patterns therefore economists and strategists of each developing country must understand their own societies and look at unique and distinguishing factors factors that can create that competitive advantage in the world market. For example certain cultures have entrepreneurial background as the strength of its people other segments of the society have traders and so on.

I end by saying that Namibia and other African countries have to strengthen their domestic markets and alleviate poverty if they must develop and prosper in the near future. Secondly the human resource of these countries must be developed at a rapid pace because skilled workers and knowledge workers are an essential pre-requisite for economies that must develop in the future.   

This paper covers the laws that revolve around the issue of Illegal immigration in the United States. The introduction explains how Illegal immigration has become a matter of national agenda thus how the U.S. is the country which has the most cases of immigration. The effects of the matter on the economy are discussed as well as the changes that have been experienced since the 1960s.   

Introduction
Illegal Immigration has grown fundamentally since 1970. The failure of various laws regarding the immigration policy has given way to the flood of immigration. The concern over this matter has been a subject in the national agenda in the U.S since 1970 because it has made its impact on the culture, economy and politics. The United States has displayed its uniqueness by being a nation that has taken up people from more than 170 countries around the world thus summing up to an amount of about 70 million and has experienced an influx of 11 million immigrants.1 This paper aims to illustrate the various literature available about the Illegal Immigration Code.

Illegal Immigration Code and the Economy
Illegal Immigration seemed to increase in size and flow regardless of the national legislation that aimed at controlling it during the 1990s thus prompting political pressure to do more. States receiving the highest number of illegal immigrants were California, Florida and Texas. These states sued the federal government in their own federal district courts for an estimated amount of dollars in billions they had for costs that were associated with illegal immigrants and their offspring. Proposition 187 was an immigration measure that was passed in 1994 by the state of California in an attempt to lessen the draw of its economy and services as a result of this. In this document, it was stipulated that the people of California were facing economic difficulties due to the presence of illegal immigrants. In addition personal injury and damage was also experienced as a result of criminal conduct by the immigrants.2

Similar notions have been expressed whereby the discussion on the U.S immigration policy alongside issues such as unemployment, racism and crime have stirred up a sense of cultural, racial and socio-economic anxieties. However, it has been observed that although the immigrants have low skills and happen to be less educated than the original inhabitants of the United States they have proven to be assets to the underground economy and have taken up employment in areas that the Native Americans refuse to accept. According to some liberal trade unionists, immigrants are used in order to cause the lowering of wage levels. An interesting fact is that conservative free-marketers among others strongly support the increase in immigration since they are the ones who mostly benefit from labor. The immigration issue is therefore an incorporation of labor economics, racism, ethnicity, nationality and multiculturalism.

Numerous immigrants that are located in the Los Angeles area are said to have contributed significantly to the local economy whereby they are the reason for the remarkable increase in share of the population. Los Angeles has lost most of its manufacturing base similar to the Midwests rust bowl. By tradition, the city depended on blue collar and unionized labor. However, it added 225,000 jobs which were 25 percent of the countrys total and over half of them went to the latest immigrants. In addition, by 1980 immigrants had accounted for more than 50 percent of the labor force in several manufacturing industries.

During the 1970s, the period had been depicted as a decade of stagflation due to the unique mixture of double-digit employment and inflation. These troubling economic circumstances, together with a change in the national origin of both the legal and an increasing number of illegal immigrants from areas such as northwestern Europe and toward Latin America and Asia have encouraged the calls for extensive changes in immigration. One such shift in policy was intended for illegal immigration and was sanctioned by employers who wanted to discourage it as included in the Immigration Reform and Control Act of 1986 (IRCA). 5

Changes in Immigration to the United States
Immigration to the U.S. has experienced significant changes three times. The first change concerned the increase in legal immigration which was a result of the passage of the 1965 revision of the Immigration and Nationality Act of 1952. The second involved the change in the national origin composition of immigrants originating in the 1950s which resulted in the rise in the number of people coming from Asia, Latin America or Caribbean countries by about 75 percent in the 1970s and over 80 percent in the 1980s.

An increase in the illegal immigration was experienced in the third change which had began in 1964 after the end of an agreement between the United States and Mexico for temporary workers in agriculture known as the Bracero Program. During this time, the number of illegal immigrant workers was increasing as well as a rise in the immigration of people who were in the country legally but chose to stay when their visa expiration dates were overdue. As a response somewhat to these tendencies, a Select Commission on Immigration and Refugee Policy was set up in 1978 with a directive to study all the characteristics of U.S. immigration policy. In a final report by the commission, it was concluded that the issue of illegal immigration was the most critical. This view was also common among the general public such as southern California where 87 percent of people who responded to this issue in an early 1980s survey were of the idea that illegal immigration was serious.6

Due to these changes, a movement to reform the immigration policy of the United States was made. Numerous legislators and citizens in the late 1970s and early 1980s had the opinion that the nation had lost control of its borders and also the fact that the costs of immigration seemed to overshadow the benefits.

The IRCA which is the legislation with the most extensive revision of the U.S. immigration policy since the national origins quota system was eliminated in 1965, has the main objective of reducing illegal immigration. The expectation was to be achieved in two ways which were
Legalization of illegal immigrants who were already in the country by means of a regular legalization program plus a legalization program that was meant for special agricultural workers.

Reduction of future flow of immigrants into the country by imposing punishments on employers who employ workers who have entered the country illegally.

According to the numbers witnessed, the legalization programs had succeeded whereby the regular programs registered about 1.8 million applications while the special agricultural workers had 1.3 million applications. However, it is difficult to determine whether the IRCA has changed the number of illegal immigrants entering the country.

By 1995, 60 percent of immigrants who had lived in the United States had entered the country without being inspected while 40 percent had disobeyed the terms of their visas after entering the country through legal means. Members of the SCIRP (Select Commission on Immigration and Refugee Policy) by a vote of fourteen to two suggested to the Congress to pass legislation that made it illegal for employers to hire illegal immigrants in order to deny them jobs.

Recently, the immigration reform has been a subject that has been talked about at length. Official pardons like those of 1986 have been suggested where strict regulations such as greater fines and paying of back taxes before living in the country have been put forth.8

Conclusion
Illegal immigration has been a major issue since the 1960s after the end of the Bracero Program which was an agreement between the U.S. and Mexico for temporary workers in agriculture. Immigration had experienced three major changes.

During the late 1980s criminal activity had been connected to the presence of illegal immigrants in California and about 87 percent of the residents had complained that it was becoming a serious matter.

Despite these facts, numbers have shown that illegal immigrants have contributed to the growth of the economy in an important way. The have contributed to 50 percent of the labor force in manufacturing industries in the country.

Recently, the issue of immigration has become a major subject whereby similar official pardons similar those of 1986 have been suggested but with several conditions to be fulfilled.

Table 1
Distribution of Mexican Immigrants by State of Residency from 1940 to 2000
Gateway States 1940 1950 1960 1970 1980 1990 2000
Arizona   7.2 6.7 6.3 4.5 3.3 3.7 2.6
California 35.6 34.0 41.9 52.7 57.0 62.9 35.4
Illinois 2.5 2.6 4.8 6.2 7.7 4.9 6.1
New Mexico 4.2 2.1 1.8 0.8 0.8 0.9 0.8
Texas 39.5 44.5 35.9 26.5 22.6 14.9 16.4
All Other States 11.1 10.2 9.4 9.4 8.5 12.8 35.3

Source Michael C. Lemay, ILLEGAL IMMIGRATION A REFERENCE HANDBOOK (Santa Barbara ABC-CLIO, 2007)

Table 2
Immigration by State, by Share of Population and Arrival since 2000
State Immigrants Share of Population Arrivals
California 9,984,000 27.8 1,809,000
New York 3,900,000 20.5 707,000
New Jersey 1,620,000 18.7 312,000
Florida 3,203,000 18.3 648,000
Hawaii 215,000 17.2 22,000
Nevada 408,000 17.1 90,000
Texas 3,379,000 15.1 948,000
Arizona 851,000 14.8 198,000
Massachusetts 880,000 13.8 201,000
Washington, D.C. 74,000 13.5 24,000
Maryland 725,000 13.1 212,000
Rhode Island 126,000 11.9 24,000
Illinois 1,417,000 11.3 286,000
Washington 650,000 10.6 137,000
Connecticut 363,000 10.4 67,000
Colorado 443,000 9.8 117,000
Virginia 719,000 9.7 188,000

Source Michael C. Lemay, ILLEGAL IMMIGRATION A REFERENCE HANDBOOK (Santa Barbara ABC-CLIO, 2007)

Notes
See Michael C. LeMay, ILLEGAL IMMIGRATION A REFERENCE HANDBOOK, p. xv.
See Michael C. LeMay  Elliott Robert Barkan, US IMMIGRATION AND NATURALIZATION LAWS AND ISSUES, p.296.

See Seth N. Asumah  Matthew Todd Bradley, MAKING SENSE OF U.S IMMIGRATION POLICY AND MULTICULTURALISM.

See Michael Fix, THE PAPER CURTAIN EMPLOYER SANCTIONS IMPLEMENTATION, IMPACT AND REFORM, p. 98.

See Michael C. LeMay, ILLEGAL IMMIGRATION A REFERENCE HANDBOOK, p.xvi.
See Frank D. Bean, Barry Edmonston, Jeffrey S. Passel  Program for Research on Immigration Policy (U.S.), UNDOCUMENTED MIGRATION TO THE UNITED STATES IRCA AND THE EXPERIENCE OF THE 1980s, p.1-2.

See Nicholas Laham, RONALD REAGAN AND THE POLITICS OF IMMIGRATION REFORM, p.4.
See Immigration Reform and Control Act.

 HYPERLINK httpwww.usimmigrationsupport.orgirca.html httpwww.usimmigrationsupport.orgirca.html

Part A   Question 1 (a)
No, my friend is not correct in saying that it will not cost me anything to go and watch the cricket game. This is because of the economic concept of opportunity cost. In his book Economics An Introduction, Walter Birmingham said that

Since we cannot have all we want of everything, we have to make a choice. The cost of producing the thing we actually choose is the amount of something else we are unable to produce in consequence.

The cost of a thing is measured by the sacrifice of other things which makes possible the production of the chosen one (1966, p. 64).

The concept of opportunity cost arose because of the reality of choice. A choice has to be made if we want or if we can do at least two things but cannot have both. Assuming that I am employed and I get 100 per day. If I go with my friend, I cannot go to work and I do not get paid. The cost for me, then, is 100, which is the salary I get for the day had I worked instead of going to the game. Sometimes, the opportunity cost may be intangible, like if I went to the game with my friend, I cannot spend the day with my family because I cannot be in both places at the same time. I need to choose. This kind of opportunity cost is immeasurable since we cannot quantify it, but then, it is still a cost to me because it is an opportunity I sacrificed in favor of going to the game.

Question 1 (b)
All human beings have needs and wants which may be satisfied by tangible things that can be produced using factors of production. Factors of production are the resources which are used to produce goods and services  and these are sometimes classified into   land, labor, and capital (Birmingham 1966). Human needs and wants are unlimited while the supply of resources, or factors of production, available to meet these needs and wants are limited. This dilemma is what is referred to in economics as scarcity of resources. Because of
                                                                                                       
this problem of resources not being enough to meet our needs and wants, choices have to be made about how to efficiently use them. Assume, for example, that a university is considering offering three additional degree courses to its present course offerings this schoolyear. Assume further that every degree course will need at least five classrooms each. Let us also assume that in its current physical state, the university can only have 7 classroom spaces available. Assume furthermore that a 3-storey building is still under construction and is expected to add at least 15 classroom spaces and offices for professors, but is not expected to be finished within the next 12 months. The need, if it were to add three additional degree courses at 5 classrooms per course, is 15 classrooms. The university has only 7 available classrooms as of the moment. In this scenario, the need exceeds the available resource. The university, therefore, is being confronted with the problem of scarcity of resources.

Question 2 (a)
The market equilibrium for a good occurs when at a certain price per unit, the quantity demanded of the good per unit of time (Qdt) equals the quantity supplied of the same good per unit of time (Qst), other factors being held constant. The market price at which this equality occurs is called the market equilibrium price and the quantity is the equilibrium

quantity. To show this graphically, let us take a look at Figure 1, where the vertical axis measures the priceunit and the horizontal axis measures the quantity demanded andor supplied per unit of time. Let us assume, for example, a certain good, say X, is being sold in the market, and that its demand curve is D1 and its supply curve is S1, as shown in Figure 1. The point of intersection between the demand curve D1 and the supply curve S1, which is shown in the graph as E1, is the point of market equilibrium for good X. Graphically, this occurs at the price of 6 per unit. Thus, at 6 per unit, the consumers are willing to buy exactly what the sellers are willing to sell at that price, shown in figure 1 as 5 units, given a unit of time, again assuming that all the other factors affecting demand are constant (ceteris paribus).

A change in one of those non-price factors affecting demand, such as the number of consumers (population), their income (wealth), their tastes and preferences (marginal utility), or the prices of substitutes, among others, will cause a shifting of the entire demand curve, to the right of the original if there is an increase in demand, or to the left if there is a decrease in demand (Bilas 1971).

Figure 2 shows the new demand curve D2 for the same hypothetical good X. Notice that D2
is to the right of D1 which indicates an increase in demand. Assuming that there are no changes in supply S1, a new market equilibrium is restored at point E2 which is the point of intersection between the original supply curve S1 and the new demand curve D2, where
Qdt  Qst, but this time at a higher price per unit.

Question 2 (b)
Cross-price elasticity of demand measures the rate of response of quantity demanded of one good, due to a price change of another good (Moffatt 2010). It therefore shows the relationship between two goods, that is, how the demand for one good, for example sugar, changes when the price of another good, for example coffee, changes. If they are  complements, which means they are demanded together, such as coffee and sugar, the coefficient of cross-price elasticity will be negative an increase in the price of coffee will decrease the demand for sugar. If the two goods are substitutes, like Coca-Cola and Pepsi Cola, cross-price elasticity will be positive an increase in the price of Coke will increase the demand for Pepsi. If they are unrelated, like cellphones and paper, the cross-price elasticity coefficient will be zero a decrease in the price of cellphones does not affect the demand for paper (The Economist).
       
Table 1. Pairs of goods matched with the value for cross price elasticity of demand
PAIR OF GOODSVALUERELATIONSHIPCars and bicyclesConsiderably greater than zeroSubstitutesMetros and BarinasSlightly greater than zeroSubstitutesCars and PetrolConsiderably less than zeroComplementsSugar and carsZeroIndependentCars and trips to PerthSlightly less than zeroComplements
Cars and bicycles will have a considerably greater than zero coefficient of cross price
elasticity because both goods are means of transportation, and thus are good substitutes for each other. If the price of cars go up, the law of demand states that the quantity demanded of cars tends to decrease, ceteris paribus. Consumers will now be looking for other similar goods which can substitute for cars, thus the quantity demanded of these substitutes, like bicycles, would tend to increase and vice-versa. The resulting coefficient of cross-price elasticity will be positive, and should be considerably greater than zero. As for metros and barinas, the cross price elasticity of demand should be just slightly greater than zero. This means that although these two goods may be substitutes for each other as indicated by a greater than zero or positive cross price elasticity of demand, they are not good substitutes and thus, an increase in the price of barinas, for example, will have very minimal effect on the use of metros. In the case of cars and petrol, these two goods are complements. Complements are goods which are demanded together, or needed together. Thus, other factors being constant, and assuming that the price of cars decrease, then more cars will be sold, which in turn means there will be an increase in the demand for petrol because one would need petrol to run these cars, and vice versa.

Thus the coefficient of cross-price elasticity of demand will be considerably less than zero. Between sugar and cars, each is neither a complement of nor a substitute for each other, which means that any change in the price of sugar does not, in any way, affect the demand for cars, and vice versa. Thus, the resulting coefficient should be zero. These goods are unrelated or independent of each other. For cars and trips to Perth, the coefficient of cross-price elasticity should be slightly less than zero. Although these goods are complementary, which means that they may also be jointly demanded, there are many other ways to go to Perth, not just by car, so the cross price elasticity should be just slightly less than zero.

The law of demand states that, all other factors being constant, as the price of a good or service increases, consumer demand for the good decreases and vice versa (Investopedia
2010). The income effect of a price change is the change in demand resulting from the change in purchasing power, with the price ratio remaining constant. Graphically, it is the movement
from the original indifference curve to the final indifference curve (Bilas 1971). The substitution effect of a price change, on the other hand, is the change in demand resulting from a change in the price ratio, leaving the level of satisfaction or utility the same. Graphically, it is the movement along the same indifference curve (Bilas 1971).

To illustrate and explain the law of demand through the income and substitution effects using a price increase assumption, let us take a look at Figure 3.
                               
Firstly, assume that the consumer is rational and that there are two goods that the consumer will buy good X, whose quantity demanded is measured by the horizontal axis, and good  Y,
whose quantity demanded is measured in the vertical axis. IC1  and IC2  are the indifference     
curves. They show the different combinations of quantities of good X and good Y which yield equal satisfaction to the consumer. They slope downward to the right since the consumer must give up one good and have it compensated for by another for his satisfaction or utility to remain constant. They are also assumed to be convex to the origin and they never intersect. All points on IC1  yield the same level of utlity or  satisfaction, assuming that satisfaction is measurable quantitatively, and that this level of utility in IC1 is greater than the level yielded by IC2. Assume further that BL1, BL2  and BL3  are the budget lines for the consumer, where BL1 is the original budget line, BL2 the new budget line if we assume that the price of good Y increased but the price of good X did not change, and BL3 is the consumers budget line if we assume that the consumers income has been adjusted,  taking the price increase into consideration, thus leaving the price ratio unchanged. This adjusted income is also referred to as real incomeThis assumption will enable us to isolate, and thus show hypothetically,  the substitution effect. The budget line is diagonal because the amount spent by the consumer on both goods together is less than or equal to the consumers income. Remember, at the onset, we have assumed that the consumer is rational.

Using these hypothetical indifference curves and budget constraint lines, the consumer will choose any point (or combination of goods X and Y) that will give him the highest utility (meaning, a combination that is on his highest indifference curve) and that is within his budget BL1. In figure 3, this is shown at point A, the point of tangency between the indifference curve IC1 and budget line BL1. Thus, he will buy Qx1 units of X and Qy1 units of Y. Now if the price of Y increases, no change in income and in the price of X, the budget line will pivot with respect to X. The new budget line will be BL2. Again, to maximize his utility given the price increase which decreased his purchasing power, he will move to point B, the point of tangency between the new budget line BL2 and the lower indifference curve
IC2. He will buy less of Qy (a decrease from Qy1 to Qy2) and more of X (an increase from
Qx1 to Qx2). The substitution effect of an increase in the price of good Y, as shown by Figure       3, is the movement from point A to point C, along the same indifference curve IC1. At point
C, the indifference curve IC1 is tangent to the budget line BL3 which, again, is the resulting budget line if the consumers income had been adjusted, taking into consideration the price increase for good Y, such that the price ratio of the two goods, X and Y, remains unchanged. The quantity demanded of X increases to Qx3 from Qx1 but the quantity demanded of Y decreases to Qy3 from Qy1. Quantitatively, the substitution effect is the difference between the original consumption of X and Y at point A and the new consumption at point C. The income effect, as shown also in figure 3, is the difference between the consumption of X and Y at point C and the final consumption of the same goods X and Y at point B, respectively. It must be noted that the income effect in our hypothetical illustration is a decrease in the consumption of X, from QX3 at C to Qx2 at B, and also a decrease in the consumption of Y, from Qy3 at C to Qy2 at B.

Thus, the substitution effect of a price change always works in the direction predicted by the law of demand. This is due to the assumption that indifference curves are convex to the origin. The income effect, on the other hand, may either be positive or negative, depending on the kind of good if the good is normal, income effect is positive (substitution effect also works in the same direction as income effect) if the good is inferior, income effect is negative and if the good is a Giffen good, the income effect overrides the substitution effect, that is, as the price of the good increases, the quantity demanded of this good also increases - a result that is contradictory to the law of demand, and as such, the demand for Giffen goods, therefore, is generally considered by economists as the exception to the law (Bilas 1971).

Question 3 (b)
The producers surplus is the amount that producers benefit by selling at a market price that is higher than they would be willing to sell for. Thus, it exists when actual price exceeds 
the minimum price sellers will accept (Ingrimayne 2010). Consider the hypothetical firm represented in Figure 4. The supply curve S shows the minimum price at which producers would be willing to supply a given level of output. The minimum price at which this firm will supply this good in the market is at 0A. As the price increases, the quantity that the firm is willing to supply also increases. The producers surplus, therefore, is the difference between the amount that producers actually receive and the minimum amount that they would have to receive in order to supply the given level of output. Graphically, producers surplus can be shown as the area above the supply curve and below the prevailing market price, shown in figure 4 as the yellow-shaded area.

Question 4
A perfectly competitive industry is a market structure in which, for it to exist, these basic assumptions are required there must be many small firms, each of whom produces a very small percentage of the total industry output and therefore has no control over price setting there must be many individual buyers, none of whom also has any control over the market price there is perfect freedom of entry and exit from the industry to ensure that all firms will make normal profits in the long run the products being sold are perfect substitutes, which leads each firm to become price-takers and the demand curve for their product is perfectly elastic or horizontal the consumers have ready access to available information about prices and products of competing sellers and sellers have ready access to the same production techniques and there are no externalities that arise from consumption andor production (Bilas 1971). With these assumptions in place, the long run equilibrium for this industry, as well as for each seller in the industry, is where P  AC  MC, where P is the price, AC is the average cost which is the total fixed cost  total variable cost divided by total units produced, and MC is the marginal cost which is the increase or decrease in the total cost of a production-run, for every additional unit of the item produced (Business Dictionary 2010).  Figure 5  is a graphical representation of the long run equilibrium of a perfectly competitive industry.         
                     
Figure 5 Long Run Equilibrium in a Perfectly Competitive Industry
The long run industry equilibrium price is Pe, and is taken by each individual firm as their product price since they are assumed to be price-takers. At price Pe, this individual firm will produce at quantity Qe where Pe  MC (point of intersection between the horizontal demand curve and MC curve) also where MC  AC (point of intersection between the MC and AC curves) and where price Pe  AC (point of tangency between the horizontal demand curve faced by the firm since it is a price-taker and the lowest point of the AC curve, indicating that at this quantity Qe, this firms average cost is at its lowest). Thus, the long run equilibrium is where P  MC  AC.

An efficient allocation of resources is achieved if it is not possible to increase societys overall satisfaction level by producing more of one good and less of another good. Such efficiency is achieved by a firm if the price of a good is equal to the marginal cost of production. With price Pe being equal to the  marginal cost, each firm is maximizing profit and has no reason to adjust the quantity of output or factory size. At this price Pe, consumer and producer surplus are maximized. The equilibrium output Qe is being produced with the average cost at its lowest, or what is called the minimum efficient scale, so there is pr

President Obama,
20500.

Dear Sir,
RE Reauthorization of Elementary and Secondary School Act
I applaud your efforts to reform the education system which has over the decades suffered from insufficient funding and inept leadership. As you correctly noted in your address to the public, America has been out educated by nations we used to lead.

This situation must be reversed if our nation is to emerge as a beacon of light in the literary world.
Funding cutbacks have affected the curriculum in schools as subjects considered unimportant are discontinued in favor of those deemed essential. Sports programs, music classes, field trips and subjects like history, religion or civics face the axe as schools boards decide which areas to prioritize. The challenge facing American education is how to develop well rounded individuals on shoestring budgets. This is proving an uphill task as teachers lack motivation since their workloads are increasing while salaries are frozen.

The system needs reforms that will recognize the importance of teachers and the vital role they play in molding the future leaders of tomorrow. Their pay should be pegged to performance and high achievers rewarded with promotion and pay increases. With improved salaries, the trend of teachers leaving their teaching jobs to take up non-teaching professions will be reversed. 

Federal support to the education sector will ensure non- core subjects crucial to developing a well rounded individual remain on the curriculum.  This move save thousands of jobs and improve the standards of education in the country. These measures require considerable funding to succeed and my prayer is that both houses will see the urgency of the matter and support your initiatives.

Yours sincerely,
A.N.Other.

Fuel economy is magnetizing official and public attention in a prominent way. Over the past two years, the gasoline prices have increased and fluctuated unexpectedly. During the peak driving seasons, dependability on the gasoline supply has increased and the evidence shows that the climate change must be considered seriously. U.S cars and trucks are liable for the emissions of carbon dioxide and the most important Greenhouse gas and are responsible for the worlds emission of annual carbon dioxide. The National Academy of Sciences conducted on the study based on two questions, is it the correct time to have need of trucks and cars to attain advanced level of fuel economy Or do such regulation causes more harm than good This report answered how and whether fuel economy standards should be changed. It evaluates the impact of fuel economy regulation on vehicles, greenhouse gas emissions, energy use, automotive industry, automotive safety and the public. During 1973 oil crisis, the Energy Policy and conservation Act was passed in the year 1975 to reduce the countrys dependence on foreign oil. Higher standards of CAFE can reduce greenhouse emissions and decrease the economys dependence on world oil market. This is considered as the sales-weighted harmonic mean fuel economy which is expressed in miles per gallon with a gross vehicle weight rating of 3,856 kg or 8,500 pounds which is manufactured for the sale in U.S. This act established the Corporate Average Fuel Economy (CAFE) which involved automobile manufacturers to raise the average fuel economy of passenger cars and light trucks. This category now includes pickups, minivans and sport utility vehicles which are sold in the United States.

Importance of Fuel Economy
There are four important things which are influenced by fuel economy. They are
Protect the Environment
Conserve resources for future generations
Reduce Oil Imports
Save Money

These four points are very important. The first point is protecting the environment. Driving cars pollutes the environment by releasing chemicals which are injurious to people and environment. The CAFE addresses on this issue because the more efficient cars pollute less. By the second and third point, we can understand that if fuel economy increases, fuel consumption will be decreased which in turn results in importing less oil. This can bring many positive effects. The fourth point has the same level of importance as of the other three. By improving fuel economy, we can definitely save money.

Historical Standards of Fuel Economy
CAFE policy has been introduced for the past three decades and the new legislation has improved the standards drastically. The efficacy of the CAFE standards has been controversial. The fuel economy was introduced in 1978 for passenger vehicles. The second category of light trucks was introduced in the next year. The Gross vehicle weight rating was distinguished from heavy duty vehicles by 6000 pounds or less. It was increased to 8500 pounds in 1980 and remained constant till 2007. Some of the particular trucks like Ford Excursion and Hummer were free from fuel economy regulations. Separate standards were recognized for two wheel drive and four wheel drive light trucks from 1979 to 1991.

During this period, the car manufacturers were permitted to choose between the combined standards or separate standards to be applied to entire light trucks which were sold in that year. Fine of 5 per one-tenth mile per gallon was imposed on those who failed to meet the standards according to the CAF standards. During 1980, due to the establishing of the fuel economy law, the vehicle competence increased steadily. Passenger vehicle mileage doubled from 13.5 to 27.5 mpg and the light trucks rose from 11.6 to 19.5 mpg. The National Academy of Sciences reported that trucks and cars would meet a 37 mpg and fleet-wide standard within ten to fifteen years exclusive of sacrificing safety or performance. In 2000, after congress lifted the freeze on fuel economy, President Bush increased a pair of minimal light trucks. He raised the standards from 22.2 miles per gallon to 24 miles per gallon, merely 2 annual increase in between 2008 and 2011 which was finalized in 2006. After four years debate in 2005, congress failed to increase vehicle efficiency standards by enacting comprehensive energy legislation. In 2007, President Bush set the target to increase vehicle efficiency to 4 annually.

Background and Analysis
Reducing U.S dependence on imported oil would be really complex without raising the price increase on gasoline or confining consumer preference in passenger vehicles. Many people argue that the impact upon the automotive industry or the economy would be unacceptable. In 1982, gasoline consumption fell to 6.5 million barrels per day and on average, up to 8.4 mdb in 1999 and during 2002 summer it has been peaking 9.0 mbd. 

Increasing CAFE is inefficient and slow means of attaining reductions in fuel consumption because of the excess time needed for the vehicle fleet to turn over. It is argued that there is standard risk interfering with the economic well-being of the automotive industry and jeopardize the consumer choice. There are opponents who criticize rising of CAFE because by downsizing vehicle weight and size, the safety concerns arise.  Proponents argue that increase in the CAFE standards will introduce technological improvements that consumers value and which do not compromise features. To raise the CAFE standards on passenger cars, highly controversial attempts have taken place in 1990s. The Omnibus energy legislation was very controversial in 1991 that it added senates inability to introduce the bill for debate.

CAF Standards
There have been significant changes in globalization of the industry, motor vehicle technology, production capacity, mix and characteristics of vehicle sales and other factors since CAFE standards were established 25 years ago. The reformed CAFE standards came in to existence with effect from 2011. In this, a program has been implemented for light trucks. During 2008-2010, manufacturers have the option to act in accordance either with the unreformed CAFE standards or with the reformed CAFE rules. Below the reformed CAFE, the CAFE level is based on the target levels fixed according to the vehicle size. The targets are allocated based on the vehicles Footprint. Footprint is the product of the average track width and wheelbase. Compliance is calculated and determined using category targets and the manufacturers actual production levels. There is a mathematical equation based on which the target values are determined.

T  1a  (1b - 1a) e (x-c)d (1  e (x-c)d)-1
Here, in the above equation,
T - Represents fuel economy target, mpg
a - Represents maximum fuel economy target, mpg
b - Represents minimum fuel economy target, mpg
c - Represents footprint value
d - Represents parameter describing the rate at which the value of targets decrease from largest to smallest, ft2
e - Represents the constant value of 2.718
x- Represents vehicle model footprint, ft2
Parameter Values for Determination of CAFE TargetsParameterYear2008200920102011a28.5630.0729.9630.42b19.9920.8721.2021.79c49.3048.0048.4947.74d5.585.815.504.65

As per the MY 2011 regulated light truck fleet, the renewed CAFE regulation applies to medium duty passenger vehicles up to 10,000 lbs. Initially in the unreformed CAFE fleet, the larger size pick-up trucks and SUVs were excluded. But this regulation captured all these vehicles. As per the DOT, the average light truck target according to the reformed CAFE rule in MY 2011 will be 24.0 mpg. The standards of CAFE were to motivate the development of technology and increase fuel efficiency.

In May 2009, new fuel economy target was announced by the President Obama. He presented 35.5 combined mpg by 2016. The 35 mpg introduced by EISA by 2020 was overruled by this new proposal. This new policy needs NHTSA to modify their fuel economy standards between 2012 and 2016. As a response to Obamas new target, EPA and DOT jointly proposed new fuel economy standard proposal. This program specifies the emission level of 250 grams of carbon dioxide per mile. In the model year 2016, the light duty vehicle fleet would reach 35.5 miles per gallon. By 2030, both the EPA and DOT standards would reduce carbon emissions about 21 percent.

Refocusing on Fuel Economy
OPEC, Kyoto and SUVs modern developments have kept the attention on the fuel economy and CAFE standards. The increase in gasoline prices and crude oil which began in 1999 led to the relief of the loss of market share of passenger cars to sport utility vehicles which use less light-truck fuel economy standard. According to the study conducted for the Department of Transportation initiated that consumers are showing much interest in the larger vehicles due to roominess, versatility and accessibility of four wheel drive. Since the mid 1980s, the lowering of average fuel economy started with the rise of market share of these vehicles together with the lower average fuel economy. In 1998, the California Air Resource Board made choice to reclassify SUVs 8500 pounds or less for the passenger cars. In July 2000, Ford motor declared that over the five year period, it would develop the fuel economy of its SUV model line by 25 percent.

Improving Fuel Economy
There are two possible approaches to decrease consumption of gasoline.
By raising the prices of gasoline by means of gasoline or by any other means which induces some conservation.

Boost the efficiency and the technology of the automobile fleet. 
Also, a mixture of these two broad approaches can be used to improve fuel economy.

Impact of CAFE on Environment and Oil Consumption
The use of fuel by light trucks and the passenger cars is one-third lower today since 1975. This improvement is due to the improvement of fuel economy by the CAFE standards and other factors like fuel prices. The increased fuel economy decreases the cost of the fuel per mile and support vehicle travel. In U.S, the major part of CO2 emissions is from vehicles. Some argue that raising the CAFE standards to decrease carbon dioxide emissions is of no use. Improvements should be made in the fuel economy so that the same vehicle should burn less fuel to travel a specified distance. To improve fuel economy, the technologies tend to add cost to new vehicles so that the consumers retain the efficient cars longer. There is a correlation between increase in miles driven, improved fuel economy and vehicle emissions. In recent years, fuel economy improved slightly but the vehicle miles have continued to increase during the oil price shocks and recessions. During this period, light-truck travel developed rapidly. But the standard of vehicle safety was a big concern. A significant decrease in gasoline consumption took place where the Kyoto agreement required the United States to attain seven percent decrease in carbon dioxide emissions. By the year 2010, according to the Department of Energy, the carbon emissions are to be 34 percent above 1990 levels. The first state to regulate carbon dioxide emissions is California.

Conclusion
CAFE was introduced with a view to control pollution, reduce American dependence on foreign oil and satisfy the needs of the consumers and provide more fuel efficient vehicles. The National Academy of Sciences concluded that CAFE has led to noticeable improvements in lessening fuel consumption, green house gas emissions and dependence on foreign oil. (National security) Chemical, Energy, Agricultural and Freight interests were prominent lobbies which opposed rising taxes on petroleum and other minerals. So Congress introduced CAFE. CAFE has met some of its principles but failed to completely achieve what it opted for. Because the economy of U.S. is the world giant, the fuel economy regulations have not only distorted U.S. citizens but the automobile industry worldwide. Due to the CAFE, automobiles weight has been reduced which has less protection at the time of accidents. In domestic automobile industry, the CAFE has increased the loss of jobs. Corporate Average Fuel Economy had an obstinate impact with each and every task it was assigned to.